Selling copyright-infringing content isn’t trademark infringement or false advertising

Joint Stock Co.“Channel One Russia Worldwide” v. Russian TV
Co., 2019 WL 804506, No. 18 Civ. 2318 (LGS) (S.D.N.Y. Feb. 21, 2019)
Channel One produces and broadcasts TV programming in the
Russian Federation and its neighboring states, and granted third parties the
“exclusive right to broadcast and re-broadcast [its] Programming and other
copyrighted materials in the United States.” Russian TV allegedly runs a
website through which it provides unauthorized access to the programming in the
United States in exchange for a subscription fee, having decrypted or acquired
unencrypted signals carrying the programming. The Russian TV website also sells
set-top boxes (STBs) that facilitate unauthorized access to the Programming.  The website invites customers to “Watch
Russian TV online” and advertises over 200 television channels; the complaint
didn’t show use of Channel One’s marks on the website, but when unauthorized
users stream the programming using Russian TV’s services, Channel One’s marks
appear at the corner of the screen.
After dismissing a couple of defendants whose involvement
wasn’t sufficiently pled, the court easily found that the complaint stated
claims for direct copyright infringement and (in the alternative)
secondary/contributory liability. In terms of unauthorized reproduction, it was
reasonable to infer that the programming data remained on Russian TV’s US
equipment for “at least several minutes” as required under Cartoon Network because the complaint alleged that defendants
“store” Channel One’s programming signals “via equipment, including computer
servers, located in the United States.” For secondary liability, given the
allegations that Russian TV offered its streaming services “at far lower prices
than lawfully licensed services,” it was plausible that Russian TV knew or had
reason to know it was selling programming acquired through infringing activity
and materially contributed to the unauthorized reproduction “by creating demand
for it, advertising access to it on the Russian TV website and distributing it
to subscribers.”
Trademark and false advertising claims were, however,
dismissed. The complaint didn’t plausibly plead that Russian TV’s acts were
likely to confuse consumers as to whether Channel One originated or sponsored
Russian TV. Nor were facts alleged to show that consumers are likely to be
confused about whether Russian TV or Channel One was the source of the programming.
Instead, the allegation was merely that Russian TV displayed Channel One’s
marks. “[A]s a general rule, the Lanham Act does not impose liability for the
sale of genuine goods bearing a true mark even though the sale is not
authorized by the mark owner because such a sale does not inherently cause
confusion or dilution.”  
Comment: this analysis skips over a lot of detail that is
fought out in other cases, particularly the various Phoenix Entertainment cases, but it gets to the right result.  There’s no such thing as a “counterfeit”
digital signal in the way there can be a counterfeit purse, as long as the
signal contains the content that is promised (here Channel One content).  A deepfake might be a counterfeit in the
purse sense, but that’s not what’s alleged. The fact that the goods/services
are intangible shouldn’t change this result (especially since the pixels on
your screen don’t “come from” the broadcaster in any physical sense; the
directions for how to configure them ultimately have the content creator as
their source, but only through multiple intermediaries—and that’s true whether
or not there’s an unauthorized rebroadcaster in the middle).  Dastar
would be another way to get to this result, but it’s unnecessary where the
court can see clearly the core issue, which is copyright.
False advertising: the complaint failed to plead anything
that was false and advertising. Russian TV’s website states “Watch Russian TV
online[.] Over 200 … channels.” “Although this may be advertising, it is not
alleged to be false.” The actual broadcasts of Channel One content weren’t
“advertising or promotion” nor were they alleged to be false. Even the display
of Channel One trademarks at the corner of the screen when consumers streamed
the content wasn’t “commercial advertising or promotion” because that wasn’t an
organized campaign by defendants to penetrate the relevant market. To the
extent the false advertising claim was based on the theory that Russian TV
misled consumers by “making it appear that Defendants have the right to
rebroadcast [Channel One] Programming and Channels,” that didn’t work because
claims about licensing aren’t misrepresentations about “the nature,
characteristics, qualities, or geographic origin of … goods or services,” as
required by §43(a)(1)(B).
The DMCA anti-trafficking claim was also dismissed. The DMCA
relevantly bars people from providing or otherwise trafficking in any
“technology, product, service, device, component, or part thereof, that is …
designed or produced for the purpose of circumventing a technological measure.”
17 U.S.C. §§ 1201(a)(2), (b)(1). But the complaint carefully didn’t plead that
the STBs provided to customers themselves circumvented any encryption, as
opposed to receiving the results of prior circumvention. Accessing what’s
already been obtained is not circumvention.
State law claims for unfair competition and infringement
were, of course, preempted by the Copyright Act. Channel One tried to argue
that Russian TV was “passing off the Russian version of Channel One Programming
as the edited version of the Channel One Programming that is licensed to cable
companies and IPTV providers.” First, relevant underlying facts weren’t alleged
in the complaint, but more importantly, that wasn’t a passing off theory: “this
alleged misrepresentation does not deceive consumers into believing they are
watching Channel One programming when they are in fact watching Russian TV
content.” So this theory was still preempted.

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